No More Boxes

Q: Not too long ago, you mentioned that ASPs were going to be the next big thing. What is an ASP and what happened to them?
–Marsha Bennett, Los Angeles

A: Back in 2000 and early 2001, ASP was the latest buzzword in technology. Experts and journalists, myself included, were predicting the end of boxed software and the dawn of a new era (see “Where Will Technology Take Us in the 21st Century?” March 2001). Application Service Providers were supposed to rule the software world, allowing consumers to simply download their applications and pay for it on a subscription basis. This meant they could opt out if the product no longer met their needs.

The prevailing wisdom was that consumers would willingly toss their bulky boxes in favor of a simpler — and cheaper — solution. And some did. Overnight, dozens of small software companies became dotcoms, touting apps that would handle everything from word processing and spreadsheets to accounting and billing.

So, what happened? Initially, many ASPs targeted consumer markets. During the dotcom crash, however, they realized that greater opportunities lay with small, medium-size, and, in some cases, large companies, not with the fickle consumer. When companies such as Microsoft jumped on the ASP bandwagon, it was a signal to ASPs that they needed to retool their business models. To survive the shakeout, they had to appeal to companies’ — and their investors’ — bottom lines.

ASPs are still around. Currently, there are about 300 of them in the $10 billion market, and analysts predict that 60% of those will disappear by 2003 as the market matures into a $45 billion industry.

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